Private Equity Achieves Extraordinary Numbers in Health and Education
posted by Frank Pasquale
The N.Y. Times has recently profiled a chain of for-profit hospitals known as HCA. The two articles are well worth reading, particularly for insights into the manipulation of medical billing and coding:
At HCA in 2006, slightly more than a quarter of the payments it received from Medicare were for patients classified in the two highest-paying categories, far behind the 58 percent reported at other hospitals, according to an analysis of Medicare payments by The Times, using data provided by the American Hospital Directory. During that time, HCA was still operating under a corporate integrity agreement resulting from its Medicare fraud settlement, and an independent reviewer was scrutinizing its billing.
By late 2008, however, just as the agreement with federal regulators was ending, HCA introduced a new coding system for its emergency rooms. HCA said the system, based on a method developed by the American College of Emergency Physicians, was less complicated and better captured the time and resources used by the hospital. Nearly overnight, HCA’s patients appeared to be much, much sicker. By 2010, HCA had surpassed other hospitals, with 76 percent of its payments coming from the two most expensive classifications, versus 74 percent for other hospitals.
Perhaps some Freakonomist will conclude that independent reviewers are vital to improving public health. But the better explanatory variable appears to be the role of private equity firms in reshaping HCA after buying it in 2006. They are revolutionizing the service sector. Just consider the miraculous work of a private equity group in getting “50 full-time faculty members to teach 90,000 online students” at a university it controls. Truly the business model of the future.
August 17, 2012 at 1:23 pm
Posted in: Financial Institutions, Health Law
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Responses (1)
Ken Rhodes - August 17, 2012 at 10:14 pm
Frank, this may seem like picking on semantics, but I don’t agree with the dichotomy you’ve posed:
(a) Perhaps some…will conclude that independent reviewers are vital…
(b) But the better explanatory variable … (emphasis on “but” creates the dichotomy)
It seems intuitive to me that BOTH (a) independent review of doctors and hospitals should contribute to improvements in public health, AND (b) for-profit orgzanizations (in any business) will work hard to maximize profits, and private equity firms are a lot more expert in that activity than a bunch of heart surgeons and oncologists.
Can’t we pick one from column a AND one from column b?
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